Reason Writers Around Town: Matt Welch Debates Dean Baker on Letting the Big 3 Go Bankrupt

April 3, 2009

On Day Three of an L.A. Times auto-bailout dust-up, economist Dean Baker warns that allowing the Big 3 to go through "uncontrolled bankruptcy" could "suddenly" erase 8.4 million jobs in Michigan, Indiana, and Ohio. Reason Editor in Chief Matt Welch responds that companies with valuable assets and products routinely emerge intact at the end of bankruptcy proceedings, and that "the federal government should be a referee, not a kingmaker, establishing clear and simple rules and procedures for industry and otherwise getting the hell out of the way. One of those procedures is the controlled force of bankruptcy."

Read the whole thing here.

Comments

|4.3.09 @ 5:54PM|#

raivo pommer-eesti-www.google.ee
[e-mail]

Banken 40 Staaten

"Die Ära des Bankgeheimnisses ist vorbei", hatten die 20 führenden Wirtschaftsnationen bei ihrem Gipfel in London verkündet; Steueroasen und unkooperative Länder müssten mit Sanktionen rechnen.

Damit richtete sich die Aufmerksamkeit auf die sogenannte graue und schwarze Liste: Gemeint ist ein Fortschrittsbericht der Organisation für wirtschaftliche Zusammenarbeit und Entwicklung (OECD). Dieser führt an, welche Länder den OECD-Richtlinien für die Besteuerung und den Informationsaustausch entsprechen und welche nicht.

Demnach hätten 40 Staaten die Steuerstandards schon umgesetzt. Auf der schwarzen Liste jener, die die Richtlinien nicht anerkennen, werden nur Costa Rica, Malaysien, die Philippinen und Uruguay geführt.

Österreich findet sich auf der grauen Liste wieder: Diese umfasst Staaten, die angekündigt haben, den internationalen Richtlinien entsprechen zu wollen, diese aber noch nicht umgesetzt haben. Dabei wird Österreich nicht als Steueroase ("tax haven") geführt, sondern unter "sonstige Finanzzentren" - mit Belgien, dem Sultanat Brunei, Chili

Seward|4.3.09 @ 6:16PM|#

"The Big Three and their employers, and the regions that are economically dependent on them, are the victims."

My retort is that the Big Three were already in trouble long before the current crisis; and this has been well known for quite some time now. They are victims of something else in other words.

First Little Pig|4.3.09 @ 6:22PM|#

Dean is wrong, Matt is right, enough said.

Having said enough, let me add that I used to work for Lehman. I have many friends who worked at Lehman when it fell. They are either at Barclay's (most) or Standard Charter (quite a number from the London office. No one is out of work from my group. Even with a "disorderly" bankruptcy the sky did not fall.

|4.3.09 @ 6:39PM|#

They may deserve blame for many serious mistakes, but they are on life support right now not because of their own errors but because of Wall Street's sins.

Bullshit.

The principal sin committed by "Wall Street" (investors) was not exercising sufficient supervision; General Motors shareholders should have risen up and removed Rick Wagoner and the Board of Directors years ago. An automobile manufacturer incapable of making money by building and selling automobiles has nobody but themselves to blame.

No Name guy|4.3.09 @ 7:11PM|#

What P Brooks said.

To expand a bit......

And, those same investors, those that held their shares and did nothing while Rick et al ran GM and the rest into the hole, have reaped the 'reward' by watching their holdings go to shit for value.

PR|4.3.09 @ 8:16PM|#

The Reckoning is finally here. David Halberstam had this nailed more than 20 years ago.

Seward|4.3.09 @ 9:01PM|#

As far as Dean Baker's argument regarding normal vs. abnormal times, well, I would say that in unusual times it is even more imperative for normal liquidations to be allowed to be undertaken, because all the government is doing otherwise is prolonging the period before the real pain begins and that merely means a more significant period of pain when that occurs.

jk|4.3.09 @ 10:45PM|#

I don't understand Baker's argument. There is only so much capital to go around. If the government pushes that capital to go in one direction, it cannot go in another. You can't spent a dollar twice. So whatever capital goes into saving the US auto industry becomes unavailable for any other investments. Baker seems to be zoomed in on the auto industry and unaware of the purposes this capital might be better applied to.

Naga Sadow|4.4.09 @ 12:05AM|#

Whoa! Was there an update to the piece? Cuz Baker threw in a "final word" at the end. I thought that Welch thoroughly trounced Dean. Yet Dean gets to add an appendum with info he didn't bother using in the original debate? AND with an arrogant tone? That is bullshit!

Yo! Fuck Dean Baker!

Inspired by Xeones.

Naga Sadow|4.4.09 @ 12:08AM|#

Welch if I don't hear about you kicking the shit out of Dean for that stunt I will lose all respect for you! Yes, I've been drinking! So what!

jk|4.4.09 @ 12:41AM|#

I've been drinking! So what!

In private, I presume. Any bartender worth his/her salt would have cut you off.

Naga Sadow|4.4.09 @ 12:52AM|#

jk,

I am a bartender. I got off early and got some sushi and a bottle of Cloudy Bay Sauvignon Blanc. Great night with the usually annoying roommates.

Brett Stevens|4.4.09 @ 1:39AM|#

The big three have been paralyzed since the unions got involved.

That in turn empowered management to become utterly corrupt at manipulating an already broken system.

Basically, they figured they answered to no one, and together unions and management ushered the big three into non-competitiveness.

Naga Sadow|4.4.09 @ 2:26AM|#

Brett,

Dude. The unions have been involved since before the 30's. Get your time frame in order and post a link, homie.

|4.4.09 @ 2:53AM|#

Dude. The unions have been involved since before the 30's.

[citation needed]



Just messing with you, I know you know your stuff.

Hire Wordpress Experts|4.4.09 @ 4:00AM|#

This is Raman from Hire Wordpress Experts.com, I am here to offer you offer you free consultation for your wordpress blogs. Please get back to me with your queries and I would be happy to solve them. In return I just need a small link to my website in your blogroll. I look forward to hear from you.

Thanks
Raman Ladhani
http://hirewordpressexperts.com
[e-mail]

|4.4.09 @ 4:32AM|#

Raman,

Spamming is highly impolite. How can anyone do business with someone who doesn't even understand this?

-jcr

Suki|4.4.09 @ 8:56AM|#

I am kind of confused, but Matt sounds right on this.

From other threads some people have mentioned the government regulations causing US cars to be more expensive to build than foreign cars. But aren't some of the foreign manufacturers subsidized by their governments?

Japan (government) for sure is heavily involved in all aspects of manufacturing. Doesn't Germany do similar?

Not saying that it would be good for the US to do the same thing, but it seems that our firms are at an unfair position.

Like many of the things on this board, I am no expert and did not study business in school, so I am really just asking and wishing to learn more.

|4.4.09 @ 10:43AM|#

I look forward to hear from you.

You sound like just the expert I need!

Naga Sadow|4.4.09 @ 11:09AM|#

FrBunny,

Nigerian spammers? Awesome! But when do I send them my bank account number?

|4.4.09 @ 11:23AM|#

The big three have been paralyzed since the unions got involved.

Yeah, they couldn't sell shit in the '50s. Or the '60s. Or the '70s. They didn't innovate at all for those 30 years either.

I'm flummoxed by the ignorance of the domestic automobile industry's history and present situation constantly displayed by commenters* around here. Don't you read?

* Not every commenter. Those I'm referring to should know who they are.

Naga Sadow|4.4.09 @ 11:26AM|#

J sub D,

I'm fully aware through reading of Henry Ford's habit of sending thugs to beat up or kill union organizers and/or workers. I gotta skip forward to 2001 before my knowledge picks up again. ;)

|4.4.09 @ 11:35AM|#

Dean Baker should review the story of the Three Little Pigs; a wobbly house is easy to blow down.

Get my drift, Dean?

|4.4.09 @ 11:51AM|#

raivo pommer-eesti-www.google.ee
[e-mail]

Schwedische Börse profitiert von kompetitiver Abwertung und billiger kroner




Kaum ist der "großartige" G-20-Gipfel vorbei, so fallen an den internationalen Finanzmärkten die Tarnkappen. Nachdem die makroökonomischen Ungleichgewichte und Währungen offensichtlich bei den Diskussionen kaum eine Rollen spielten, kehren die Anleger im Rahmen des in den vergangenen Tagen aufgekommenen Wirtschaftsoptimismus zu altbewährten Strategien zurück.

Sie lassen am Devisenmarkt mit den Yen und dem Schweizer Franken die üblichen Verdächtigen abwerten. Denn erstens haben diese Staaten ihre Zinsen schon immer tief gehalten. Zudem machen sie inzwischen mit "unkonventionellen geldpolitischen Maßnahmen" deutlich, dass sie unbedingt schwache Währungen haben wollen, um den kompetitiven Status ihrer Exportbereiche zu wahren oder gar im Vergleich mit konkurrierenden Staaten zu verbessern.



Schweden macht vor, wie das gehen kann. Der reale effektive Wechselkurs des Landes läuft schon seit Jahren im Trend nach unten. Und in den vergangenen Wochen haben sie auf die globale Wirtschaftsschwäche, die sich im kleinen, stark am Export orientierten Land deutlich bemerkbar macht, mit massiven Zinssenkungen reagiert. Die schwedische Zentralbank hat den Leitzins mit massiven Schritten von 4,75 Prozent noch im Oktober des vergangenen Jahres auf zuletzt ein Prozent gesenkt. Genau das ließ die schwedische Krone gegen den Dollar um 30 und gegen den Euro um bis zu 20 Prozent abwerten

|4.4.09 @ 12:48PM|#

NS,
I've been reading the Detroit newspapers for 40+ years and the industry history for almost as long. It's a Detroit thing. I've made no secret that I'm a UAW brat and that gives one perspective as well.

For the record, Ford (the last holdout) signed a UAW contract prior to the US entry into WW II.

Y'know, I don't have a clue to what killed McDonnell Douglas and Lockheed in the commercial airliner business so (helpful H&R credibility hint coming) I don't fucking opine on the subject!

|4.4.09 @ 12:51PM|#

That last sentence was NOT aimed at Naga Sadow.

|4.4.09 @ 1:14PM|#

This is a very interesting article, about Porsche maintaining flexibility and control by outsourcing production of Cayenne/ Boxster to Finland.

Money quote (for me):

Mr. Wiedeking has said repeatedly that it is "preferable to build one car too few than one too many." That allows Porsche to keep pricing its cars like the luxuries they are, rather than constantly discounting them in order to work off excess inventory - a strategy that left Porsche near bankruptcy in the early 1990s.

At a time when companies like Daimler and BMW are offering strong incentives for sales in the United States, Porsche is holding the line.

Somebody should have taught that idiot Wagoner that, ten years ago.

|4.4.09 @ 1:16PM|#

Oops- minor fuck-up: should be "Cayman/Boxster" production.

Naga Sadow|4.4.09 @ 2:29PM|#

J sub D,

I didn't think it was.

Kolohe|4.4.09 @ 2:31PM|#

Y'know, I don't have a clue to what killed McDonnell Douglas and Lockheed in the commercial airliner business

Lockheed made only brief forays into the commercial airline business post ww2, none of which were terribly successful.

McD's was getting their clocked cleaned by Boeing (and Airbus), and were making mistakes that their civilian customers - unlike their military customers - would not tolerate.

But all that's just from Wikipedia. :)

|4.4.09 @ 2:45PM|#

Raivo,

There is something wrong with your keyboard, you are coming in as indecipherable foreign gibberish. Take your computer to the tech guy.

thnx

ev|4.4.09 @ 3:44PM|#

raivo pommer,

Warum antwortest du auf deutsch? Es ist ok und mir egal, aber warum? Ich habe fur (keine umlauts heir) 6 Monaten in Deutschland gewohnt und ich habe NIEMAND wer englisch nicht reden konnen. Du verstehst unsere englisch nachrichten...warum antwortest du in eine sprache die fast niemand heir verstehen kann?

Es macht kein Sinn! (Aber es ist meine Ausrede zu deutsch schreiben/uben.)

ev|4.4.09 @ 3:45PM|#

correction: ich habe NIEMAND wer englisch nicht reden konnen getroffen.

ev|4.4.09 @ 3:46PM|#

for non german speakers, this is how fucked up the language is. (i recommend twain's humorous essay on the subject, 'the awful german language.'

ich habe NIEMAND wer englisch nicht reden konnen getroffen

means literally: i have no one who english not speak can met.

|4.4.09 @ 3:50PM|#

ev,

Wenn ist das Nunstruck git und Slotermeyer? Ja!...
Beiherhund das Oder die Flipperwaldt gersput!

Jordan|4.4.09 @ 5:46PM|#

But aren't some of the foreign manufacturers subsidized by their governments?

Yes. Why should we object if German and Japanese citizens want to pay us to buy cars?

Dave W.|4.4.09 @ 6:29PM|#

No post on the gun-nut going postal in PA?

|4.4.09 @ 7:04PM|#

Very off topic: Awful news from Pittsburgh:

Gunman 'lying in wait' kills 3 Pittsburgh officers

What I thought would interest you folks was that the AP article contains this gem, after noting that the crazy gunman had mentioned to friends that he thought Obama would ban guns:

Obama has said he respects Americans' constitutional right to bear arms, but that he favors "common sense" gun laws. Gun rights advocates interpret that as meaning he would approve some curbs on assault and concealed weapons.

[emphasis mine]

Coincidentally, the guy had been laid off from a glass factory in the area recently (remember Obama's anecdote about the guy who got a job at a glass factory being evidence the stimulus was working?)

|4.4.09 @ 8:01PM|#

An America without GM would be like an America without Packard.

|4.4.09 @ 9:00PM|#

GMs biggest problem is making cars nobody particularly wants to buy.

As far as the shareholders, a lot of them where union pension funds that choose to pretend that unfunded pension liabilities where okay.

Brett Stevens|4.4.09 @ 9:44PM|#

NS,

That's a perfect example of a non sequitur.

|4.4.09 @ 11:01PM|#

Company pension funds are always a bad idea.
It takes way longer for the fund to pay off than it takes for the market to kill a company that has unproductive overhead.

The whole premise of the company pension fund is based on the false and egregiously stupid notion that you can count on the company to be around forever.

That never happens. 50-60 years is just way too long a time scale to make ANY predictions about which industries are likely to survive.

In fact it's better for society as a whole if companies are routinely being created and destroyed. The more churn there is, the easier it is for the system to find the optima, which is constantly moving as technology evolves.

SIV|4.5.09 @ 2:06AM|#

GMs biggest problem is making cars nobody particularly wants to buy.

Who doesn't want a Corvette, or a loaded Caddy?,or even a Silverado pick-up?

GM makes fine, highly desirable vehicles. The problem lies elsewhere.Too bad their new owners think like you do.

An America without GM would be like an America without Packard.
No Packard was a great marque and America is slightly less than it once was due to their demise.GM is/always was a fucking holding company.There is a marque called GM but they've always duped other products from the parent company for dealer/marketing purposes.

|4.5.09 @ 9:30AM|#

Err, people who buy the superior offerings from BMW, Porsche, Audi etc etc etc.

Suki|4.5.09 @ 10:29AM|#

Who doesn't want a Corvette, or a loaded Caddy?,or even a Silverado pick-up?

Not I and not beloved boyfriend either!

I am a Ford girl, he is a Dodge guy (and quite pissed about that whole government thing).

Suki|4.5.09 @ 10:31AM|#

Jordan,

Yes. Why should we object if German and Japanese citizens want to pay us to buy cars?

Ok! That is making some sense. I like it.

Suki|4.5.09 @ 10:34AM|#

stupid remember me thingie

Suki|4.5.09 @ 10:34AM|#

UGH! It won't stay on what I change it to!

The Wine Commonsewer (You can |4.5.09 @ 11:32AM|#

The United Nations flag at the top of the page is a nice touch for a libertarian blog. :->

The Wine Commonsewer (You can |4.5.09 @ 11:34AM|#

Who doesn't want a Corvette, or a loaded Caddy?,or even a Silverado pick-up?

I don't want a 'Vette because I already had my mid-life. Next mid-life crises I'm getting a twenty year old hottie instead.

The Wine Commonsewer (You can |4.5.09 @ 11:41AM|#

Ah, SIV, the Packard.

I used to be Chevy man and I liked big fat Chrysler motors cuz they would go very fast and they hung together better than the big block Shivolays. But that was way back in the Pleistocene era.

GM, IMO, does not build particularly great cars any more and they haven't for a long time. Certainly all cars are better built and last longer than they did thirty years ago. but there is a considerable gap among cars. Some are better, on average, than others.

Plus there are people like me who bought crappy GM cars and were subsequently hosed trying to get satisfaction. GM figured sheer size allowed them to be fairly cavalier about it. Those chickens are now safely in the roost because there are enough of us with a grudge and a long memory and who feel like flipping GM the bird.

I wouldn't buy a GM vehicle if it was the best on the market.

|4.5.09 @ 12:21PM|#

Who doesn't want a Corvette, or a loaded Caddy?,or even a Silverado pick-up?

The problem (or a major component thereof) is not that *nobody* wants those shitboxes, it's that, because of extremely poor decision-making by GM "management" over the past decades, they build far more of them than people *actually* want.

Then they have to bribe customers (and their captive rental car companies) to take them away, to make room for the new overproduction.

|4.5.09 @ 12:27PM|#

Quite some time ago, well before the "implosion" of GM, I was watching an automotive-analysis discussion on the teevee; they were talking about GM, and Hummer in particular. One of the people asked this simple, but very insightful question: "What if everybody who wants a Hummer has one, by now?"

I'll bet nodbody at GM ever asked that.

|4.5.09 @ 12:48PM|#

The problem (or a major component thereof) is not that *nobody* wants those shitboxes, it's that, because of extremely poor decision-making by GM "management" over the past decades, they build far more of them than people *actually* want.


I don't think it's really just management. The unions make it difficult to shed employees and shut down plants, and they get paid either way, so it makes more sense for GM to build the cars than to not build them.

But I agree that the cars are not undesirable. I have a 10 year old Chevy Cavalier, and have basically no mechanical problems with it. Very reliable.

The pension funds are a big problem too. If they shrank down to their "natural" market share, the pensions would consume an even larger share of revenue. They've got no choice but to try to maintain their market share. If they lose it, they can't bring in the money to pay off the retirees.

|4.5.09 @ 1:10PM|#

The unions make it difficult to shed employees and shut down plants, and they get paid either way, so it makes more sense for GM to build the cars than to not build them.

That was my point; and management signed those contracts. Painting yourself into a corner where you can't make money at anything less than full output (and probably not even then) is absurd.

|4.5.09 @ 1:12PM|#

They've got no choice but to try to maintain their market share.

"Buying" market share by selling at a loss doesn't get you anywhere, over the long term.

ev|4.5.09 @ 1:13PM|#

Fuck the auto bailout, as i'm sure everyone here thinks too.

they knew about these smaller japanese cars in the late seventies. they've had 30 fucking years to get their act together and conform to the market. they didnt.

fuck the fucking fuckers.

|4.5.09 @ 1:36PM|#

My retort is that the Big Three were already in trouble long before the current crisis; and this has been well known for quite some time now. They are victims of something else in other words

They were victims of employees who could not provide goods that enough people were willing to pay for to cover the costs of production.

|4.5.09 @ 1:59PM|#

They were victims of employees who could not provide goods that enough people were willing to pay for to cover the costs of production.


yeah. As I've been saying recently, when workers control the means of production, they tend to produce crap that nobody likes and then force them to buy it by shutting down competition (trade protectionism and regulation).

|4.5.09 @ 5:28PM|#

Surprising to nobody, the feds interference with GM and Chryslers business decisions has attracted the notice of local pundits here in Motown.
Nolan Finley wrote something relevant for the Thursday edition of the Detroit News.

Take as an example Gov. Jennifer Granholm's fickleness in prognosticating about the automobile industry.
...
In 2004, the governor's crystal ball was filled with hydrogen.
...
By 2007, the hopeful hydrogen balloon had deflated, and the governor was drinking ethanol-laced Kool-Aid.
...
Now, the governor is wired to electric vehicles, telling WJR's Paul W. Smith this week that gas-electric hybrids and plug-ins will lead us to an energy independent future.

Obama's auto council (or whatever the hell it's called) will likely be just as obtuse making product development decisions.

|4.5.09 @ 6:16PM|#

Obama's auto council (or whatever the hell it's called) will likely be just as obtuse making product development decisions.


Of course it will. They are going to force GM to produce hybrid and electric cars. Those cars will not sell, for various reasons. Not just because of lower gas costs, but because of the inherent limitations of the design - charge times, performance, range. They will then increase the tax subsidies. They still won't sell. The subsidies will induce Europe and Japan to improse retalatory tariffs on what few sucessful exports America has left.

I'm not making this up. It's all happened before. It's pretty much guarenteed to happen because of the political forces driving it. It's inevitable.

Orange Line Special|4.5.09 @ 6:21PM|#

First they came for the Alex Jones readers...

Don't worry: Reason and the SPLC are best buddies, you have nothing to worry about.

Taktix®|4.5.09 @ 6:28PM|#

Shut the fuck up, Lone Whacko!

Naga Sadow|4.5.09 @ 6:28PM|#

Chris!!!!!!!!!!!!!!!!!!!!!!!!!!

*shakes fist at Chris Kelly*

|4.5.09 @ 6:37PM|#

I'm oppossed to all of these bailouts, auto, financial, etc., but in the case of GM & Chrysler, wouldn't it have made sense for The Feds to buy up all the extra inventory these companies had and give the cars away? I don't think is a particularly good policy idea, but if we're giving the cars companies (loans they probably won't pay back), couldn't we have gotten something in return? They would have gotten the cash they needed to stay afloat, rid themselves of excess inventory, and Obama puts a new car in a few thousand garages.

Taktix®|4.5.09 @ 7:05PM|#

I'm oppossed to all of these bailouts, auto, financial, etc., but in the case of GM & Chrysler, wouldn't it have made sense for The Feds to buy up all the extra inventory these companies had and give the cars away? I don't think is a particularly good policy idea, but if we're giving the cars companies (loans they probably won't pay back), couldn't we have gotten something in return? They would have gotten the cash they needed to stay afloat, rid themselves of excess inventory, and Obama puts a new car in a few thousand garages.

That's what I've been saying, but the dirty little secret is that the companies are failing because of a bad business model, not because of poor cash flow or poor sales.

Real companies plan for off years because they don't know if some asshole in Washington will throw cash at them...

Naga Sadow|4.5.09 @ 7:57PM|#

Taktix,

Work on Sunday? Bra, that's like school in summertime!

|4.5.09 @ 9:19PM|#

Work on Sunday? Bra, that's like school in summertime!

Considering your lacklister academic performance as a child Naga, you should know.

Suki|4.5.09 @ 9:57PM|#

AWSOME! Hydrogen bottle = Car-B-Que! Huge!

|4.5.09 @ 10:15PM|#

I loved the fading sign of the Great Atlantic and Pacific Tea Company.
That's the grocery store where I first swung like Tarzan on the scale in the produce department. The big pan came clanging down as I recall.

You don't see A&P much anymore. Yet I ain't starvin'. Why is that?

|4.5.09 @ 10:24PM|#

You don't see A&P much anymore. Yet I ain't starvin'. Why is that?

Not only that, there are hardly any horse-drawn buggies left in the town where I live, but people still get where they need to go.

-jcr

|4.5.09 @ 11:08PM|#

I loved the fading sign of the Great Atlantic and Pacific Tea Company.


No kidding. Someone should buy the logo and bring it back. I think we're ripe for a nostalgic late-19th century "golden age of imperialism" fetish. It would extend right out of the Steam Punk movement. Steamships, brass buttons and knobs, British aristocrats travelling all over the jungles of Africa, spreading quaint customs like afternoon tea and doilies.

I recently read 'She' by H. Rider Haggard. Really entertaining book along those lines. Someone should totally remake the movie. It's got swamps, hostile natives, cannibals, yellow fever, tigers, and a strange undiscovered tribe worshipping a white woman. It would make a fantastic B movie.

The Wine Commonsewer (You can |4.6.09 @ 12:30AM|#

I loved the fading sign of the Great Atlantic and Pacific Tea Company.

Lileks has some pretty cool old building signs....

http://tinyurl.com/d97hv4

|4.6.09 @ 7:55AM|#

like it or not, Dean's last word is correct: DIP financing likely would not be available for GM absent a government guarantee. That said, even that is hardly a reason to avoid bankruptcy. If the government had provided a guarantee for DIP financing in December, we would be four months into a restructuring right now. Instead, we have thrown 20 billion dollars down a rat-hole, and the Government will STILL have to provide DIP financing to go bankrupt, only now GM is 20 billion further in the hole. Those 4 months of employment cost 20 billion - and did not significantly alter the prospects of GM. In other words, the poor availability of private DIP financing is NOT an argument against bankruptcy.

|4.6.09 @ 9:20AM|#

I think it is safe to say there is no one with decision making capability at GM/Chrysler in the '70's to today that is not at fault for where they are. Management went with the wrong cars, went cheap when they should have gone premium (to maintain volume), went safe when they should have been bold ('80s and '90s Olds/Chevy/Buick clones, Chrysler's successors to the K car). UAW demanded increasing benefits well past the profit peak of GM and only grudgingly gave back while GM was selling cars for a loss ("don't worry, we'll make it up in volume").

GM and Chrysler (and Ford for that matter) have been in critical condition since the late '90s (kept alive by truck and SUV sales), but have been unable to successfully get past the worst of their condition. Now, because their volume has collapsed (not their credit, which was junk before anyway), they can't fend off death and consolidation any longer without government money. Meanwhile, while taxpayers pay to keep the GM and Chrysler products cranking out, Ford employees suffer from unfair competition and employees in the south at the transplant plants get laid off to reduce their capacity so that their parent companies stay profitable (I'll grant you that the Japanese and German governments have provided additional subsidies to their industries, but I don't present that as an excuse for the US to do the same, especially when the US transplant plants provide the same job opportunities as the domestic manufacturers US plants).

GM is dying, but isn't about to disappear even in bankruptcy. They still have good products and decent brands. They have a chance as a much smaller company. Chrysler, meanwhile, well they tried, but there isn't much to salvage. They have the wrong cars at the wrong time with the wrong direction. We need to let this overcapacity go and let someone with capital buy the worthwhile remains. Otherwise we just prolong the inequality in the market and force the market in the wrong direction.

|4.6.09 @ 11:02AM|#

I think GM has two problems:

(1) Their costs are artificially high due to "legacy" obligations under their union contracts and work rules.

(2) They are forced by CAFE regulations to build many models that they cannot sell at a profit.

OK, three problems:

(3) Their management has lacked the cojones to deal with these two problems.

|4.6.09 @ 11:04AM|#

I recently read 'She' by H. Rider Haggard. Really entertaining book along those lines. Someone should totally remake the movie. It's got swamps, hostile natives, cannibals, yellow fever, tigers, and a strange undiscovered tribe worshipping a white woman. It would make a fantastic B movie.

B movie be damned. Make it a Brad Pitt/Angelina Jolie vehicle, and you have a billion dollar summer blockbuster.

ChrisO|4.6.09 @ 12:57PM|#

(2) They are forced by CAFE regulations to build many models that they cannot sell at a profit.


I disagree with those regulations, but it's worth pointing out that Honda and Toyota are bound by those regs also, and they manage to turn a profit.

Anyone who remembers the disastrous moves GM made in the '70s through '90s knows exactly why the company is on its knees now.

The worst period had to be the '80s. I had a '77 Buick LeSabre that was a very decent automobile. But within five years after that, GM had retooled their entire line to be nothing but ugly little derivatives of the X Car (Chevy Citation, etc.). Their car line was a complete joke by 1984. And almost simultaneously, Honda and Toyota completely removed any remaining traces of weirdness or tackiness from their small car lines.

Daran|4.6.09 @ 1:28PM|#

Not a union guy, but it's management responsibility to run the company. Can't blame the union for asking for something and management giving it.

|4.6.09 @ 1:32PM|#

B movie be damned. Make it a Brad Pitt/Angelina Jolie vehicle, and you have a billion dollar summer blockbuster.

That's today's version of a 'B' movie. We just call the 'A' movies 'arthouse' now.

ChrisO|4.6.09 @ 5:32PM|#

Not a union guy, but it's management responsibility to run the company. Can't blame the union for asking for something and management giving it.

To a point. When the company is bleeding market share and losses, the workers' representatives need to start thinking about more than how much they can squeeze the company for in the next contract.

The Big Three got fat and happy from having the U.S. market all to themselves in the '50s and '60s, and they have never been able to get over that mindset after all these years. "On A Clear Day You Can See General Motors" was published 30 years ago, and the corporate rot was clearly in evidence by then.

|4.12.09 @ 7:41AM|#

raivo pommer-www.google.ee
[e-mail]

BLIND MONEY

The absolutism of the key tenets of neo-liberalism: privatisation, deregulation, balanced budgets have all been rejected by all but the most dogmatic. Apart from one that is: the primacy of free trade.

Its status is basically sacrosanct. While banks are being nationalized, bonuses recalled, and trillions of dollars of debt racked up, while pretty much every other concept, belief or ideal is being interrogated, contorted or just set aside, "Free trade is good" continues to be presented as a totemic truth, ring-fenced from debate or interrogation. Any questioning of this axiom is not even on the G-20's agenda.

In fact the Free Trade brigade, which encompasses most mainstream politicians, business leaders, and thinkers -- outside of France that is -- seems to be on evangelical overdrive. "The solution to the crisis is more free trade," says Brazilian President Luiz Inácio Lula da Silva. China's Commerce Minister Chen Deming announces that Beijing is "firmly opposed to trade protectionism," a sentiment often echoed by Germany's Chancellor Angela Merkel, while British Prime Minister Gordon Brown expressly warns against abandoning "the gospel of free trade."